Oil prices rose for a third day on Thursday on expectations of a surge in fuel demand later this year, particularly in the United States and Europe and China, at the same time major producers are maintaining supply discipline.
Brent crude futures were up 40 cents, or 0.6%, at $71.75 a barrel, after earlier reaching the highest since September 2019. The international benchmark gained 1.6% on Wednesday.
US West Texas Intermediate crude futures rose 34 cents, or 0.5%, to $69.17 a barrel. Prices earlier rose to as much as $69.40, the most since October 2018, after gaining 1.5% in the previous session.
The consensus among market forecasters, including the Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, is that oil demand will exceed supply in the second half of 2021, which has spurred the recent run in prices.
OPEC+ data shows that by the end of the year oil demand will be 99.8 million barrels per day (bpd) versus supply of 97.5 million bpd.
This rebalancing will be led by resurgent demand in the US, the world’s biggest oil user, from vehicle consumption this summer, along with rising fuel needs in China, the world’s second biggest oil consumer, and in the UK as it exits its Covid-19 lockdowns.
“The US driving season is a period that sees higher‑than‑normal fuel consumption. UK traffic is now sitting above pre‑pandemic levels,” CBA commodities analyst Vivek Dhar said in a note. “We continue to see the oil demand recovery led by the US, Europe and China.”
US crude oil inventories fell by more than 5 million barrels last week, according to two market sources, citing American Petroleum Institute figures on Wednesday.
OPEC+ agreed on Tuesday to continue with plans to ease supply curbs through July.
The OPEC+ meeting lasted 20 minutes, the quickest in the grouping’s history, suggesting strong compliance among members and the conviction that demand will recover once the Covid-19 pandemic shows sign of abating.
A slowdown in talks between the US and Iran over the latter’s nuclear programme has also reduced expectations for Iranian oil supply to come back to the market this year.
The European Union envoy coordinating the discussions said he believed a deal would be struck at the next round of talks starting next week, though other diplomats cautioned that difficulties remain.
“The current talks in Vienna to revive the 2015 nuclear accord, which would see U.S. sanctions on Iran lifted, now look unlikely to find a resolution,” said CBA’s Dhar.